If after budget planning you realise that you have little or nothing left to make creditor repayments each month you need to consider either entering into a reduced payment arrangement with all creditors or possibly Bankruptcy or a Debt Relief Order. It’s a big step, but sometimes the only way out of the nightmare.
Reduced Payment Arrangements
Say you have monthly debt repayments of £600 and your surplus each month after paying out your primary household bills and food bills is £300 you may wish to come to an arrangement with creditors to pay a reduced sum each month. This is best done if you think you will in the future obtain a salary increase or are likely to receive a lump sum payment that would enable you to eventually clear all your debts.
If you do get a lump sum, perhaps an inheritance, it can be worth seeing if a creditor will accept a settlement figure. Be cautious how you word things or they might just think it will pay them to play hard ball if you’ve cash in the bank.
A good site to find more information on this and sample letters to creditors is Citizens Advice They also operate an advice telephone line where you can talk to someone who can help guide you
If you don’t have enough money to meet your repayments and for the foreseeable future, will not have a salary increase or be in receipt of a lump sum to repay your debts a Debt Relief Order or Bankruptcy Order may well be your best option. This is not something to enter into casually, talk it over with citizens advice.
Debt Relief Orders
Debt Relief Orders are available to those with less than £15,000 of qualifying debt, who are on a low income and who have assets and savings worth less than £300 and own a vehicle worth no more than £1,000. To apply for a Debt Relief Orders costs £90, but this can be paid in instalments.
For more information on Debt Relief Orders including how to apply and what it will mean to you financially the following sites may help: Citizens Advice
If you have more than £15,000 worth of debt or assets that are greater than £300 (such as equity in your home) you may wish to petition for bankruptcy. If you are a company director you will have to resign from this position during the duration of your Bankruptcy and in addition to this it will remain on your credit score for 6 years after the Order is made.
For more information on Bankruptcy Orders, Debt Relief Orders and Individual Voluntary Arrangements see The Insolvency Service
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